Twitter Updates

November 2016

11/29/2016

Did you know that over 10,000 people per day are retiring here in the United States? 10,000! That is a lot of people.

I often wonder how many want to but don't believe they can afford it. Could it be a 1,000 or more???

Unfortunately most people tend to underestimate their life expectancy, save less than they should and fail to consider how much health care might cost in retirement.

In this day and age we are living longer, we are also experiencing more health issues with our increased life expectancy. The typical 65-year old couple will need at least $300,000 to cover out-of-pocket health care costs over their lifetime. Most people have not planned for these type of expenses. Increased life expectancy and unexpected expenses increase the possibility of outliving your assets.

As baby boomers move into retirement without sufficient income sources, many Americans are going to be unable to meet their basic financial needs in retirement.

Reverse mortgages are another tool in the retirement toolbox that could offer seniors cash flow needed to cover living costs. Admittedly, Americans have a strong negative bias toward reverse mortgages. Much of that negative bias is rooted in misconceptions and issues with bygone reverse mortgage issues. The reverse mortgages of today are not the same as reverse mortgages 10 year ago. As such, reverse mortgages deserve a second look today.

One of the most common misconceptions is that the bank will own your home if you take out a reverse mortgage when in actuality, with a reverse mortgage loan, borrowers retain ownership of their home, as long as they stay current on their property taxes, homeowner's insurance and otherwise comply with the loan terms.

The market has become simplified in recent years. The Home Equity Conversion Mortgage (HECM) is used for nearly all reverse mortgages. It is essentially a government loan sold by private companies.

For most people looking to retire, the majority of their wealth is stored in their home, which is not a very liquid asset. A reverse mortgage is a way for homeowners to unlock some of the equity in their home without having to make monthly mortgage payments.

Who is eligible? To be eligible for a Home Equity Conversion Mortgage, you must be a homeowner 62 or older, own your home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse loan. You need to have sufficient financial resources to pay for property taxes and insurance, and you must live in the home.

The HECM becomes due and payable when the last remaining homeowner leaves the home permanently. You don't lose your home at that time, the mortgage just needs satisfied.

A reverse mortgage is a non-recourse loan, as the home is the only collateral that can be used to repay the loan balance. This means that if the sale of the home does not cover the entire loan balance, then FHA pays the difference, not the borrower's family.

How much could a borrower expect to receive? Depending on their age, homeowners typically can tap between 50 percent and 75 percent of the home's appraised value, with a maximum loan limit of $625,500. The older the borrower and the lower the interest rate, the higher the available loan amount.

Another option that's growing in popularity is one where a borrower takes out a reverse mortgage standby line of credit. This is a great option for borrowers who aren't interested in tapping their equity unless an emergency arises or when they feel the funds are needed.

Tapping into your home equity through a reverse mortgage HECM line of credit can be an effective way to avoid selling your investments when they drop in value as well.

For Example, let's say the market drops 20 percent next year. Would you rather sell your stocks that are down 20 percent to get your retirement income or would you rather borrow from your home equity at 4 to 5 percent interest? Studies have shown that you would be much better off using your home equity in a down market year. Doing this could substantially increase the sustainability of your retirement portfolio and help make your money last for a lifetime.

Contact me if you have any questions? You may be able to help someone retire and live the life they dreamed of.

11/15/2016

Recently I was in a conversation with a gentleman that is 66 years old. He goal was to retire when he was 70 and spend the next bunch of years taking care of his grand children that lived here in San Diego and visiting his other grandkids that lived in Denver. He had a total of five grankids and loves them so much. I am not a grandfather yet but I can only imagine the joy of having these young ones in your life again.

I asked him why he didn't retire now or hadn't already. He response was "I have a few financial goals to hit to make it comfortable and possible". As those of you who know me i started to ask questions which I have a habit of doing. What came out of this discovery process was that he needed his home to be paid off so he could eliminate that $2500 per month payment. Social security, a small pension and his 401k would provide the income for him to live his life in retirement how he wanted to, i.e. financial freedom.

We then moved to the topic of a reverse mortgage to help him rid himself of the monthly payemnt. He had a large amount of equity in his home and he met the age requirement to make a reverse happen. This transaction could make his dream of retiring now possible. Stay tuned, we are digging into the numbers to see if it meets all of his financial goals but he is excited about the possibility.

Let me know if you may have questions or comments about this type of scenario. It can be a life changer!

11/11/2016

I was watching my former home state team last night, the Cleveland Browns (please no comments on that) and as usual I am fascinated when professional football teams get called for a delay of game penalty. How can that happen and it does happen to every team in the NFL. I guess it is due to the complexity of the game plan and play calling but these are the highest level of professionals, come on folks!

Now, relating this to the personal financial world, a "delay of game" can be a good thing when it comes to delaying taking social security benefits in retirement. For those of you out there that are younger, this can dramatically increase the monthly benefit you receive if you wait a few years. Often times though retirees can't wait, they need the supplemental income NOW! This is where a reverse mortgage can help.

Retirees can use a reverse mortgage loan to access cash, set up a line of credit and eliminate their complete monthly mortgage payment or any combination of the above enabling them to refrain from tapping other retirement sources of income. This can completely eliminate the stress over cash flow in retirement.

In addition, it is possible to reduce or eliminate the need to tap into 401k or IRA savings which may be taxable. If you have a loved one who may be in this situation, give me a call. I am happy to answer any questions you may have. Happy Veterans Day!

11/10/2016

This was a quote from a past client of mine and not only a past client but a very good friend. So I want to start out by apologizing for not properly sharing all that I do to help my friends and past clients with their mortgage needs. I have been originating mortgage loans for some time now, almost a decade, but many don't know that I do reverse mortgages as well.

I imagine you are at least somewhat familiar, maybe a TV ad or something on the radio, with reverse mortgages and quite likely have heard misinformation or maybe information you don’t fully understand. This is quite normal.

One key point here, you may not even be close to the age required for a reverse mortgage (Age 62 or older) but are your parents? Aunts, Uncles, neighbors? If so, please take a minute to read on.

Reverse mortgages can work wonders in some cases and it can also be used as a strategic tool for people who are very well off.

Let me share a quick story with you about someone I just helped. Joni is 81 and living in her home that she has owned for the past 20 years. Joni had a lot of equity but cash flow was her biggest issue, we needed to fix that and fix it soon.

She is an amazingly talented artist and singer who was an opening act for Elvis back in the day and is still teaching voice lessons to make ends meet. She was even considering bringing in a renter to help pay the bills. Can you imagine your mom or dad considering this option of bringing a stranger into their home to help pay the bills?

Joni was curious about the reverse mortgage so we began the process. Her credit history was not perfect (who’s credit history is, right?) but we were able to get her loan approved and eliminate her total payment – principal, interest, taxes and insurance. Instead of $2200 due at the beginning of each month it was now -ZERO! As she described it, “Dan you are a life saver”. Now, I don’t know about that but this transaction was a life CHANGER.

In my next post I will share with you how someone that is well off can benefit from a reverse mortgage as well, such as paying for long term care, but it if you know someone that could use my help immediately, please have them call me and mention you introduced them to me.

The actual mechanics of how the reverse mortgage work can at times be complex so please call me to discuss or have your family members call me directly at 858-688-6813. This way we can separate the bad misinformation that is out there with the facts.